Secure Cash

Peoples Leasing Company is coming out with a Rs. 500 mn debt paper, backed by an SL A rating from Fitch Ratings Lanka Ltd.
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ThernLease Backed Trust Certificates (LBTC), will be issued by a Special PurposernVehicle (SPV) called Peoples Leasing Trust Nine, under the firms assetrnbacked borrowing programme.

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SLrnArnrating denotes a low expectation of credit risk. The capacity for timely paymentrnof financial commitments is considered strong. This capacity may, nevertheless,rnbe more vulnerable to changes in circumstances or in economic conditions than isrnthe case for higher ratings, Fitch said in a statement on Monday.

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PLCrnproposes to pledge the receipts from a pool of lease contracts to Deutsche Bankrn(DB) in its capacity as the Trustee for a SPV Trust.

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Therntrust (called PLC Trust Nine), finances the loan to PLC by issuing LBTCs tornmarket investors to the value of Rs. 500 mn. PLC would continue to service thernunderlying contracts.

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ThernLBTCs are backed by a pool of 585 lease contracts with a principalrnoutstanding of Rs. 629 mn at the point of origination.

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Therncontracts have been originated to finance motor vehicles.

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Allrnthe leases are level pay fixed rate receivables with average seasoning of 3.5rnmonths, weighted average Loan to Value (LTV) of 93 percent and no delinquency atrnthe point of origination of the trust.

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Thernrating of the LBTCs are based on the credit enhancement in the form of anrnaverage and minimum Debt Service Cover of 1.40 and 1.21 respectively.

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Principalrnover collateralisation in the form of asset cover stands at 20 percent at thernbeginning of the transaction.

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Inrnorder to maintain the collateral quality and cashflow cover, the transactionrnprovides for replacement of leases which have prepaid or gone into a delinquencyrnstatus of two months, every three months or whenever the principal of delinquentrnleases has risen above 2.5 percent of gross principal outstanding of the thenrnexisting aggregate lease principal.

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Therntransaction also incorporates a cash cover trigger, wherein excess cash flowsrnare trapped in the reserve in case the debt service cover falls below 1.15, andrnrequires that the balance of the lease principal always exceed the poolrnprincipal by 1.2 times.

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Besidesrnthese protections, the trust has full recourse to PLC, who is obliged to top uprncollections to meet any deficiency in meeting the investor payouts.

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PLCrnis a specialised leasing company, which commenced operations in 1996 as a fullyrnowned subsidiary of Peoples Bank, which is the second largest bank in SrirnLanka.

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PLCrnwas formed to carry out leasing finance for the customers of Peoples Bank.

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PLCrnhas benefited from the strong franchise and operational support from PeoplesrnBank, which includes customer referral.

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CurrentlyrnPLC has a network of 12 branches across Sri Lanka. In addition it has access tornthe branch network of Peoples Bank, which is the largest in Sri Lanka.

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FitchrnRatings Lanka Ltd is a joint venture between Fitch Ratings, USA, InternationalrnFinance Corporation Washington, Central Bank of Sri Lanka and several otherrnleading local financial institutions.

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FitchrnRatings, USA is one of the three global full service credit rating agencies andrnrates over 85 sovereign nations, 7,600 structured finance ratings, 2,900rninternational banks and financial institutions.

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FitchrnRatings Inc. has over 90 years experience in credit analysis and a combinedrnanalytical and professional staff of more than 1,400 many of whom possess overrn10 years of specialised industry experience.

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